What is Private Money Lending and Why You Can Be Paid A Premium For Doing It

Private money lending may sound like some secret, sexy term for a new investment vehicle; it’s really a pretty basic concept that isn’t widely utilized because most investors aren’t educated about it or its potential for big returns. I hope to change that for you during the course of this short report. Quite simply, private money lending, is when you lend your money to a real estate investor who has purchased a property at a very significant discount. Most of the time the property or the prior owner of the property has become distressed. If it’s the seller of the property, they could be going through a life changing event that is preventing them from no longer making the mortgage payments. This can be due to any number of things like loss of income, divorce, death of a spouse, or an adjustment in mortgage payments. In any case, one of these scenarios has left the seller unable to make the mortgage payments so they must sell the home. If it is the home that is distressed, it is usually due to deferred maintenance that has accumulated over time and the seller does not have the financial ability to make the needed repairs. If they need to move and they cannot make the repairs, then they must sell at a significant discount relative to fair market value. Regardless of whether it is the seller that is distressed or the home that is distressed, these situations call for real estate investors like myself to purchase the home at a heavy discount because I am willing to close quickly and to do the needed repairs. CLOSING QUICKLY and DOING NEEDED REPAIRS are exactly what give you, as a private money lender, the opportunity to command substantially bigger returns on your investment dollars versus what you may be typically getting via your current investments…such as your money market, CD’s, IRA, etc.Consider this: when you put your money in the investment vehicles I listed above, what happens? The bank or financial institution pays you a fairly low return so they can then lend your money out at a higher return and they reap the rewards on lending out YOUR MONEY. Why should they? Shouldn’t you be the one reaping the rewards for lending your YOUR MONEY? Welcome to the world of the Private Money Lender! Private Money Lenders that lend to real estate investors like myself can often make anywhere from 6-15% return on their money. Why? Because private money lenders give investors the ability to do 2 things that most “banks” will not do. Banks cannot or will not CLOSE QUICKLY and 99% of the time they will not lend if a property needs REPAIRS to bring it up to fair market value. Real Estate Investors like myself are willing to pay a premium on private money because the nature of most distressed sales encompass the need to close quickly and to do the repairs. You, as the private money lender, can offer something the bank cannot – therefore, you can command very handsome returns. One of the best parts about private money lending to real estate investors like myself is that you actually get to make the rules regarding rates and terms of the loan, and your loan is backed up by a hard, tangible asset, which has been purchased significantly below market value. Insuring that your maximum loan amount is well below market value gives you solid protection on your investment and this is what helps you determine the safety of your investment.